Discount Treasury Bills are government securities with maturity of less than 12 months. There is no interest payment on these securities rather, they are issued at a discount which means that they are issued at a price which is lower than the face value of the security. The face value is repaid on the date of redemption and the difference between the purchase price and the face value is the discount.
At present, Discount Treasury Bills have three distinct maturity periods – 3 months, 6 months and 12 months, respectively but because of the active secondary market of these securities they are available for almost any likely remaining maturity until 12 months in the secondary market.
Usually in the financial market, since the beginning, Discount Treasury Bills have been issued through public placements, at auctions. Currently the Discount Treasury Bill auctions are held in the following manner:
For 3 month Discount Treasury Bills - Tuesdays every week
For 6 month Discount Treasury Bills - Wednesdays of every odd numbered week (Bi-weekly)
For 12 month Discount Treasury Bills - Thursdays of every odd numbered week (Bi-weekly)
The payments take place on Wednesdays of the week following the week of the respective auction and so does the transfer of ownership, in the same way. The funding plans usually determine the offering amount of Discount Treasury Bills. As a matter of continuance the redemption dates of Treasury Bills also fall on Wednesdays.
Discount Treasury Bills in the primary market are sold directly only to primary dealers, the investors have to place orders for these securities with primary dealers. In the secondary market Discount Treasury Bills could be obtained, from primary dealers or in the branch network of the Treasury. Both resident and non-resident individuals as well as legal entities, and non-incorporated economic associations can purchase Discount Treasury Bills. Such investors can trade discount treasury bills through the whole maturity period without limitations.